BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 181 |Hearing |4/8/15 |
| | |Date: | |
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|Author: |Committee on Governance and |Tax Levy: |No |
| |Finance | | |
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|Version: |2/9/15 |Fiscal: |No |
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|Consultant|Weinberger |
|: | |
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FIRST VALIDATING ACT OF 2015 (URGENCY)
Validates the organization, boundaries, acts, and bonds of state
and local agencies.
Background and Existing Law
For more than 70 years, the Legislature's annual Validating Acts
have boosted the stability and credit ratings of state and local
bonds. The Validating Acts cure public officials' mistakes that
might otherwise invalidate boundary changes or bond issues. They
also correct errors or omissions by local agencies and state
departments. The Acts do not protect against fraud, corruption,
or unconstitutional actions.
Proposed Law
Senate Bill 181 validates the organization, boundaries, acts,
proceedings, and
bonds of the state government, counties, cities, special
districts, and school districts,
among other public bodies.
State Revenue Impact
No estimate.
SB 181 (Committee on Governance and Finance) 2/9/15 Page 2
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Comments
1. Purpose of the bill . The annual Validating Acts protect
investors from the chance that a minor error might undermine the
legal integrity of a public agency's bond. Banks, pension
funds, and other investors will not buy public agencies'
securities unless they are sound investments. Investors rely on
legal opinions from bond counsels to assure the bonds' credit
worthiness. Without legislative action to cure technical
errors, bond counsels are reluctant to certify bonds as good
credit risks. SB 181 gives legislative protection to public
agencies and private investors.
2. Which mistakes ? The three Validating Acts cure
typographical, grammatical, and procedural errors. They do not
forgive fraud, corruption, or unconstitutional acts. A local
official who makes a technical error will find reassurance in
the Validating Acts, while a corrupt official faces prosecution
regardless of the Acts.
3. Taxpayers benefit . By insulating state and local bonds
against harmless errors, the Validating Acts save taxpayers'
money. Strong legal opinions from bond counsels result in
higher credit ratings for state and local bonds. Higher credit
ratings allow state and local officials to pay lower interest
rates to private investors. Lower borrowing costs save money
for taxpayers.
4. Why three ? Starting in the mid-1920s, the Legislature
passed separate validating acts for different types of bonds,
several classes of special districts, and various local boundary
changes. By the late 1930s, the practice was to pass annual
validating acts (AB 2842, Bennett, 1939). The current custom
and practice is to pass three Validating Acts that retroactively
cure public officials' mistakes. The first two measures are
urgency bills that go into effect when they are chaptered. The
First Validating Act (SB 181) will probably reach Governor
Brown's desk this spring, validating errors made before the date
on which the bill is chaptered. The Second Validating Act (SB
182) will reach Governor Brown in August, validating mistakes
SB 181 (Committee on Governance and Finance) 2/9/15 Page 3
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made after SB 181. The Third Validating Act (SB 183) will take
effect on January 1, 2016, covering the period between the
chaptering of SB 182 and the end of 2015.
Support and
Opposition (4/2/15)
Support : Association of California Water Agencies; California
Association of Local Agency Formation Commissions; California
Special Districts Association; California State Treasurer John
Chiang; California State Association of Counties; Rural County
Representatives of California.
Opposition : Unknown.
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